Citigroup Inc. (Citigroup), incorporated in 1988, is a global diversified financial services holding company. The Company is engaged in providing a range of financial services to consumers and corporate customers. As of May 4, 2009, Citigroup had more than 200 million customer accounts and did business in more than 140 countries. Through its two operating units, Citicorp and Citi Holdings, Citigroup provides consumers, corporations, governments and institutions with a range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management.

On December 5, 2008, the Company completed the sale of German retail banking operations to Credit Mutuel. On July 31, 2008, it sold CitiCapital, the equipment finance unit in North America, to GE Capital. On July 1, 2008, Citigroup and State Street Corporation completed the sale of CitiStreet, a benefits servicing business, to ING Group. On June 30, 2008, Citigroup completed the sale of Diners Club International (DCI) to Discover Financial Services. During the year ended December 31, 2008, Global Cards sold substantially the entire Upromise Cards portfolio to Bank of America. During 2008, the Company sold its interest in the Citigroup Global Services Limited (CGSL) to Tata Consultancy Services Limited (TCS).

Breakdown of the two business segments:

Citicorp

Citicorp is a global bank for businesses and consumers, which has two primary underlying businesses: the Global Institutional Bank and Citigroup’s regional consumer banks. Global Institutional Bank serves corporate, institutional, public sector and private banking clients. Citigroup’s regional consumer banks provide traditional banking services, including branded cards, as well as small and middle market commercial banking.

Citi Holdings

Citi Holdings is primarily comprised of the Company’s brokerage and asset management business, local consumer finance business, and a special asset pool. Citi Holdings focuses on risk management and credit quality.

2009-05-07 Stress Release:

Citigroup reportedly passed the FEDs stress test to see if it was adequately capitalized, but regulators said it needed $5.5 billion more to be adequately capitalized. You have to wonder what kind of test it was when all 19 insolvent banks passed, some even needing more capital. But that’s the official word, and if you pay no attention to the $5.5B shortfall, Citi passes it’s stress test.

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2009-04-17 Q1 Earnings:

Citigroup employed the usual various and sundry accounting techniques and a one time trading gain to pull a $1.6 billion profit out of the hat in its fiscal first quarter 2009. The first quarter is in the book as the $300 billion bombshell ticks on.

Citi’s tally now reads as below:

1. Write-Downs/Charge-Offs: $88.9B + $5.62B = $94.52B

2. Cash Raised: = $36B

3. TARP: $25B + $20B = $45B

4. Taxpayer Non-TARP: $125B

5. Level III Assets & SFAS157 : $X.X +$413M + $2.7B??

6. Loan Loss Reserves >$6.1B1.

Misery Index > $309.7B

2009-01-20 Q4 Earnings:

Citigroup reported a fourth-quarter loss of $8B on write-downs of $5.6B. This is fairly pedestrian for this type of bank. By now, even the $6.1B buildup of loan-loss reserves could be met with a yawn, but selling its profitable Smith Barney unit to Morgan Stanley indicates that Citigroup will likely split into two.

In the process it becomes our misery leader.

Citi’s tally now reads as below.

Write-Downs/Charge-Offs: $83.3B + $5.6B = $88.9B

Cash Raised: = $36B

TARP: $25B + $20B = $45B

Taxpayer Non-TARP: $125B

Level III Assets = $??

Loan Loss Reserves >$6.1B

Misery Index > $301B

2009-01-08 Crammed Down :

Citigroup agreed to allow judges to change the terms of mortgages for at risk borrowers. Wait and see.

2008-12-04 Crime Time:

Robert Rubin, Chuck Prince and other Citi insiders cashed out with hundreds of millions of dollars while other not-so-well-connected investors lost trillions of dollars as the stock price crashed. Strangely, those investors think something stinks and have filed suit in federal court.

2008-11-25 More on The Non-TARP Guarantee:

Now we come to the the matter of valuing the $(306-29)(.90) billion stealth capital injection from the taxpayer to Citigroup. The arithmetic come out to $249.3B, but we will say $250B for government work, which this is anyway. For now we will estimate the probability of a collapse to near zero of the $306 billion to be 1/2, then the expectation is that the taxpayer will give up another $125B.

Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses. After that, remaining losses will be split between Citigroup and the government, with the bank absorbing 10% and the government absorbing 90%. The US Treasury Department will use its $700 billion TARP or Troubled Asset Recovery Program bailout fund, to assume up to $5 billion of losses. If necessary, the Government’s Federal Deposit Insurance Corporation (FDIC) will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses. The measures are without precedent in US financial history. It’s by no means certain they will salvage the dollar system.

So the tally now reads as below.

Write-Downs/Charge-Offs: $83.3B + $14.2B = $83.3B

Cash Raised: = $36B

TARP: $25B + $20B = $45B

Taxpayer Non TARP: $125 B

Level III Assets = $??

Loan Loss Reserves = $2.5B + $3.9B + previous > $6.1B

Reader beware: more losses are on the way.

2008-11-21 Panic:

It’s getting to be that time, panic time. The once-stoic Citi has droped all pretense and moves now with desperation to prevent its inevitable collapse.

The federal government announced that it was investing an additional $20 billion in Citigroup under the Troubled Asset Relief Program (TARP). This is on top of an initial infusion of $25 billion in October.

Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses. After that, remaining losses will be split between Citigroup and the government, with the bank absorbing 10% and the government absorbing 90%. The US Treasury Department will use its $700 billion TARP or Troubled Asset Recovery Program bailout fund, to assume up to $5 billion of losses. If necessary, the Government’s Federal Deposit Insurance Corporation (FDIC) will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses. The measures are without precedent in US financial history. It’s by no means certain they will salvage the dollar system.

The problem with putting a number on this is we don’t know if all $306B worth of assets will go to zero. If that is the case, then the government would pump $250B into the the Citi. If none of the assets falls to zero the bank gets zilch, so our capitial raise number is between $o and an eclilipsing $250B. We need a estimate for the probability that the pool becomes wothless. This acturial type of valuation is the way leve;l 3 assets should be marked ie level 3 should be valued on an acturial basis. I think I know why they don’t do it that way!

2008-11-17 Falling:

With write-downs and losses piling up and earnings nowhere to be found, Citigroup is cleaning 50,000 jobs off the balance sheet before Christmas.

Citibank is friends with the devil and rolling in the fruits of taxpayer toils with the its acceptance of $25 billion under TARP? The TARP injection was announced on 10-14-2008, but the date on the Transaction Report is 10-28-2008. The 10-28 date kicks off the banks Q4 cash raising so we will add it to the $36B already in the heavy hat.

Citigroup has reached a settlement in the auction rate securities claim against the bank. All told, Citi will cough up $19.5B in two big chunks: $7.5B to charities and small businesses under a settlement with New York State, and then another $12B to 2600 different institutions holding instruments.

Our twin tallies, Pain and ARS-Buyback, now stand at $144.5B and $19.5B.

2008-07-29Write downs Outed:
The big Citi soft balled its second quarter write-downs to beat the Street. Now they have to cough the remainder up in chunks before third quarter reporting.

Citigroup engages in the shadow accounting of credit world derivatives and dark assets held off the balance sheet. Do they think we are all blind and sitting on the STUPID bench?

2008-07-07Crashing:

Citigroup has crashed into its fiscal second quarter 2008 earnings report just like the bank demolished the last three. As the bleeding continues, Citi is missing earnings just like every other bank. But desperate times require desperate measures, not ineffective ones.

2008-06-25Level III:

The losses and write-down numbers for Citi are staggering, but as of March 31, 2008, you could easily lob another $22.7B on the mountain. That’s because of the FAS 157 rule requiring banks to list their level 3 or junk assets. From the banks first quarter 10Q

If Citi were able to sell this stuff, they would have long ago. If they didn’t have to make it public they wouldn’t. But if you think these assets will recover anytime soon or at all, I have a house I want to sell you at its 2006 listing price. So our level III tally comes to a cool $22.7B.

It’s hard to say whether the real story here is the nosedive of Citi’s Falcon fund or the type of life insurance polices banks routinely purchase on directors, officers and employees. Of course, the banks own and are the beneficiaries of the policies, known as bank-owned life insurance (BOLI). In either case Citi is left wide open to possible law suits and even further write-downs.

As for our friends in the Citi, they skipped $2B from the income by putting it to the balance sheet in a quarterly filing without telling a soul.

Citigroup Inc. subtracted $2 billion from equity for the declining value of home-loan bonds in its quarterly report to the Securities and Exchange Commission on May 2 without mentioning the deduction in the earnings statement or conference call with investors that followed.

Well we will have to see about that. We have Citi write-downs and disasters at $67.1B and we do believe that a $2B adjustment will balance things out nicely.

New distress number –drum roll– $69.1B.

2008-05-08 – Sleight of Hand:

Minyanville reports that Citigroup’s level three assets have reached 125% of shareholder equity. That is a fantastic figure considering the tens of billions the denominator has increased in the past few months, as Citi has been frantically “raising capital.”

Citi originally said Tuesday that it would raise $3 billion in a stock offering, but increased that amount by $1.5 billion after demand for the new shares exceeded its original offer. The banking giant said the offering priced at $25.27 per share, with the transaction totaling more than 178 million shares.

So they coughed up $4.5B this trip, leaving no doubt that there are more fools out there than we thought.

Goldman however was not impressed by the $4.5B raised. Perhaps the Golden Boyz are right this time — was the initial asking price a low-ball to create the illusion of an onslaught of investor demand in the ailing bank?

2008-04-29 – Citi Wants More:

Only a week after selling $6B in preferred stock, Citigroup said give me more, more, more. The largest US bank by assets said it will sell at least $3B in common stock. Short sellers will be out in force.

This brings Citigroup’s cash raised total to over $36B.

2008-04-29 – Crimes in the Citi:

The laundry list of Citigroup’s questionable dealings just got two hedge funds longer. As the bank spirals down to bankruptcy, bailout or the pink sheets, it is difficult to tell if it is doing everything it can to survive or attempting to take the rest of the world down with them.

2008-04-19 – Abysmal Earnings:

Citigroup begins 2008 the same way it finished 2007. The bank reported a worse-than-expected first quarter loss of $5.1B, but it was the monstrous write-downs totaling $15.1B that terrified investors. Even after burning over $46B of toxic trash in 2007 and giving its kitchen sink “mea culpa” in Q4, the first quarter 2008 write-down was a monster hit even by Wall Street standards. And ourever-near-a-CNBC-camera Meredith Whitney is already contemplating another dividend cut call. For the present, Citigroup’s fiscal first quarter 2008 was bad:

In other words, there were a lot of write-downs; and many were tied to ongoing weakness in the mortgage industry.

Mish has a post summing up all the slings and spears of Citigroup’s misfortune.

So is the $15.1B the last bomb — the kitchen sink? Doubt it!

As this blog documents below, Citigroup had a near-death February weighted down by a litany of troubled subprime-related assets that are exposed to write-down risk. The write-downs won’t quit until the exposure ends, and neither will our tally, which now stands at $46.6B + $15.1B = $ 61.7B.

The deal was made in this manner specifically to muddy the waters. It appears that Citi is setting up a con game in which they may pretend they got 90 cents on the dollar when they really didn’t. That 20% indemnification clause in the sale is like a PUT option. That option has a value and it’s a huge mistake to pretend otherwise.

“Mistake” puts it lightly. We might use the term “lie”.

Bloomberg wants you to think everything will be rosy for Citigroup once the bank is able to sell $12B of loans at a loss to Apollo Management, Blackstone Group and TPG. But as long as Citigroup and friends keep lying about valuations, there will be problems down the road.

This all reminds us of the still-popular “seller concessions,” used to prop up home values (and of course Realtor and lender commissions), in the process severely damaging markets.

Bloomberg reports in a long article on credit lines that Citigroup has about $471B of undrawn credit line commitments (or at least, did at year-end 2007). As the article points out, this fact is much worse than it would seem in isolation, since now more than at any other time in living memory, borrowers need to draw down those credit lines.

And they are — the article headlines by noting that even Porsche and Sprint are hitting the credit lines hard.

It’s a thousand cuts for Citigroup and its uberbank brethren; you can add this to them.

We hear in the risk channel that the internal situation at C is going from bad to worse as veteran Citi bankers are in near-mutiny against the new, two-headed management team imposed by regulators. Meanwhile, former CEO Chuck Prince, who is a consultant to C, is leading the discussions with regulators on behalf of the bank and is, in effect, acting as shadow chief executive of C. One insider predicts that the C annual meeting in several weeks time will be “very messy” and notes that acting Chairman Robert Rubin is nowhere to be seen.

Keep in mind that C, JPM and many other large banks are still trying to get their arms around the full dimension of the risks facing their institutions, this even as bank loan default rates remain well-below long-term averages. All of the subsidiary banks of C, for example, reported 127bp of charge offs in 2007, a full 2 SDs above peer but well below 1991 loan loss levels.

They believe Citigroup needs about three times current capital just to shore itself up against a more normal level of charge-offs. The 1991 recession was “mild” — this one won’t be.

Citigroup has got caught up in the suddenly volatile municipal bond market. In what’s becoming a common event, the plunging prices of municipal bonds are forcing prime brokers to issue margin calls:

The move to inject $600m, and pledge $400m more, to shore up the funds, which had capital of $2bn and total assets of about $15bn, is another sign of Citigroup’s difficulties in dealing with the credit squeeze.

This adds another $1B to the tally.

2008-03-07:

We are warming up the calculator as Citigroup has announced more losses on the way:

Citigroup said Thursday it will reduce its mortgage assets by $45 billion over the next year and will streamline its remaining mortgage operations in an attempt to lower expenses by $200 million during the same time period.

We will have to see how the bank spreads out the writing-down. One thing for sure is that the buyers won’t be lining up around the block.

Another potential source of losses comes as the result of a somewhat desperate effort to raise cash. Forbes is reporting the bank will issue $2.5B in bonds. But because of the toxic nature of Citi’s paper they will have to underwrite most of it themselves, which could leave them holding a bag of their own unsold junk. It could easily be a large portion of the $2.5B.

We will keep our eyes open for possibly a large chunk of that $47.5B turning up in the dead pool.

2008-03-06:

The rift between reality and fantasy is widening at Citigroup and for the analysts that promote them. Six months ago, analyst Robert Olstein said:

Cititigroup Inc. won’t cut its dividend further or raise more capital and the shares may double over the next two years, investor Robert Olstein said.

That’s the dyslexic analysis; in the reciprocal period, its share value has been cut in half. Meanwhile back in the real world, actions speak louder than words and the bank

has started shedding clusters of U.S. branches in places where the bank lags far behind larger rivals.

Citi CEO had a message for employees to be ready to pack up at any time.

In a memo to Citigroup employees, Mr. Pandit wrote: “We anticipate that divesting some of our peripheral businesses will further contribute to our capital base.” He added that Citigroup remains “financially sound” despite more than $20 billion in losses last year on loans and investments.

We say about $16.6B more and counting.

2008-02-27:

A potentially bombshell revelation about Citigroup’s remaining risk exposure is tucked in this Bloomberg piece. Witness:

Citigroup, which has incurred $22.1 billion in losses from the subprime crisis, has $320 billion in “significant unconsolidated VIEs,” according to a Feb. 22 filing by the New York-based bank. New York-based Merrill Lynch, which recorded $24.5 billion in subprime writedowns, has $22.6 billion in VIEs, according to CreditSights.

What are these VIEs and why are they a threat? The article has a brief primer:

The new source of potential losses: so-called variable interest entities that allow financial firms to keep assets such as subprime-mortgage securities off their balance sheets. VIEs may contribute to another $88 billion in losses for banks roiled by the collapse of the housing market, according to bond research firm CreditSights Inc. …

…

VIEs, known as special purpose vehicles before Enron Corp.’s collapse in 2001, finance themselves by selling short-term debt backed by securities, some of which are insured against default.

…

Predictions for losses vary widely because banks aren’t required to specify the type of assets being held in the VIEs or how much they are worth, said Tanya Azarchs, managing director for financial institutions at S&P.

“The disclosure on VIEs is hopeless,” Azarchs said. “You have no idea of the structure or how that structure works. Until you know that you don’t know anything. It’s like every day you come into the office and another alphabet soup.”

Ah yes, these shadowy vehicles figured prominently in the Enron fraud and collapse, but its OK folks, they were renamed from “SPVs” to “VIEs.” Problem solved!

Obviously, not really. Remember how Citigroup had about $80B in SIVs? And remember how that was already disaster enough, with the “re-consolidation” of those off-balance-sheet vehicles resulting in Citigroup’s greatest earnings disaster and capitalization emergency in its history? Remember complete pieces of the company being sold off to Arab Shieks and Communist governments around the world?

Oh, great. We remember too. And, well, the company has another $320B in that kind of exposure.

Call them SIVs, SPVs, or VIEs; call them rutabagas or Flying Elvises if you want — its all the same thing: ethically fraudulent concealment of risks using off-balance-sheet vehicles to dodge regulatory capital requirements. There’s nothing new here, except the size of the numbers at stake.

We can’t wait to see the write-downs that come out of this monumental trash heap. A hint of the extent those might reach also comes from the article:

The securities in the VIEs may be worth as little as 27 cents on the dollar once they’re put back on balance sheets, according to David Hendler, an analyst at New York-based CreditSights. Hendler based his estimate on the recent sale of $800 million of bonds by E*Trade Financial Corp.

That would represent a haircut of more than $230B on the VIEs. Wow.

2008-02-26:

And the beat goes on for Citigroup as it is revealed the bank is holding about $20 billion of hard-to-value trading positions. Those hard to value positions are probably level 3 assets. That means no market exists for them, i. e. they are worthless. Technically it has to be said a market can always develop for the assets and they may be sold for a huge gain, in commercial real estate that is. I expect that we will see a write-down for theses positions too.

2008-02-23:

A Telegraph write-up contains a detail we missed in our last update: Citigroup has announced a $4B exposure to the troubled bond insurance sector. So you can throw that one on the pile.

2008-02-22:

At this rate Citigroup might not make it past the weekend. It’s been two days since Meredith Whitney made her devastating revelations about the bank, and the action has already begun. Following the usual MO of announcing bad news after the market close, the bank confessed that it once again would make the rounds, hat in hand, to cover the cost to bring their hedge fund Falcon Strategies funds onto its balance sheet (hedge fund implosion profile for Falcon here). The financial media reporting of the statement goes along the lines of the Associated Press:

Citigroup Inc. earlier this week agreed to provide $500 million in credit to one of its troubled hedge funds, the bank disclosed in a regulatory filing late Friday. The Citi-managed fund, known as Falcon, was brought onto the bank’s books, which will increase the bank’s assets and liabilities by about $10 billion.

And it’s the same at Bloomberg, Reuters, Marketwatch, and WSJ. That is $10B in assets and liabilites, but which is the greater? Well let’s see

The banking conglomerate also warned that further deterioration in the US housing market could lead to further write-downs in its sub-prime and leveraged loan books.

Thanks for the heads up, guys. We’ll still be keeping our own count just the same, which for distress and write-downs just went up by $10B.

2008-02-22:

If we had to pick which big bank would fail first, then we’d take Citi. In this interview Meredith Whitney, Oppenheimer & Co’s banking analyst, reveals the under-capitalized structure of Citigroup and additional write-downs of up to $70B. Here is how she sums it up:

Citi now has earnings problems, they have balance sheet constraints, they have further CDO writedowns, they have exposure to the monolines and they have the single largest concentration of exposure to high LTV [Loan To Value] mortgages.

Excluding balance sheet constraints we get $149B in exposure, up $38B from our previous sum of $111B.

There is also a great lesson in here that actions do in fact speak louder than words. Hear ye:

Banks aren’t lending so businesses can’t grow, manufactures can’t invest, and this is a systemic issue because banks are still in denial. If these assets were truly marked to market banks would be indifferent to whether they hold them or sold them. Obviously they are not indifferent. The fact they are holding it means they have some hope that these assets will recover.

2008-02-20:

In addition to subprime lending it seems that some banks gorged themselves on a leverage buyout binge as well. From the WSJ:

The investment banks look to have put a lot on the line for relatively little payoff. Citigroup, for instance, earned only $856 million in fees from private-equity firms in 2007, even though the bank underwrote leveraged loans totaling $114.3 billion and still holds $43 billion in exposure. Oppenheimer analyst Meredith Whitney estimates Citigroup’s leveraged loan write-downs would be about $2.5 billion at the range implied by the 6% decline in the leveraged-loan focused Markit LCDX index since the fourth quarter.

If your keeping count (and we are, don’t worry) thats another $2.5B written down to the bottom line. New total write-downs including LBs come to $26.6B. For the remaining subprime related exposures, add $43B to the previously recorded $68B for a grand total of $111B.

2008-01-31

Citigroup recently reported fourth quarter 2007 net losses of $9.8B on the back of massive subprime-related write-downs. This has been bested only by UBS’s recent losses, but Citigroup’s gross write-downs and exposure are much larger.

Breaking the figures out, according to the company’s earnings report, they took a $6B write-down in the third quarter, followed by a whopping $18.1B in the fourth. This brings the year’s total to $24.1B (so far counted).

The company began “subprime reckoning season” in late 2007 with nearly $80B in off-balance-sheet SIVs and conduits tainted by subprime. They apparently decided it would be better to own up to the impact of these vehicles and brought them back onto their balance sheet in late December. This torpedoed prospects for the Treasury’s “M-LEC” SIV bailout fund in the process. Good riddance!

Citigroup successfully sold off some of the assets from these funds, contributing to the large fourth quarter net loss figure. According to the fourth quarter report, they reckon just over $29B of subprime ABS/CDO exposure remains, as well as $8B in RMBS, and about $30B in direct subprime lending.

We also have a figure of $1.7B for exposure to insurer ACA.

The total net exposure would then be about $68B for these items.

As of yet we do not have data on other forms of shaky mortgage loan exposure (Alt-A, Pay Option, etc.).

7 Responses to “Citigroup – $309.7B”

Citi is planning on reducing its mortgage exposure by $45B by letting the portfolio run off through prepayments. Somehow, your calculation turns this number into a loss. It’s like a little kid posted this analysis pointing a finger at someone and saying “dodo head”. That’s about how smart it appears. What’s going on?

I think Citi took the radioactive securities off their balance sheet and stuffed them into Falcon to avoid writing them off. How else could you lose 50-80% of the money in 3-4 months. Stevie Wonder couldn’t lose that much in that short period of time. As you have written, Citi has no way to raise more capital or write of any large amounts of money. They had no choice to commit fraud and deceive people. If they lost the money fair and square, just show me how you did it, with all cusip numbers and trades. If it was all fair, investors can accept that loss if it wasn’t fraudulent.
The Fed has an 850 Billion dollar balance sheet, so it is very possible that Citi can go broke. People must accept the fact that the world’s formerly largest bank can be broke or insolvent.
They have not told the truth here. Somebody needs to get the truth. Maybe the fired or resigned manager will reveal what really happened here. Sad part is Citi probably moved him somewhere where he can’t be found.
I have called Chalie Gaspirino and Meredith Whitney about this. Also have spoken with David Enrich and several lawyers suing them about Falcon. Everyone seems leery of going after them. The truth is, they are crooks.
Thanks for your report, it comes closest to the truth.

I think Citi took the radioactive securities off their balance sheet and stuffed them into Falcon to avoid writing them off. How else could you lose 50-80% of the money in 3-4 months. Stevie Wonder couldn’t lose that much in that short period of time. As you have written, Citi has no way to raise more capital or write of any large amounts of money. They had no choice to commit fraud and deceive people. If they lost the money fair and square, just show me how you did it, with all cusip numbers and trades. If it was all fair, investors can accept that loss if it wasn’t fraudulent.
The Fed has an 850 Billion dollar balance sheet, so it is very possible that Citi can go broke. People must accept the fact that the world’s formerly largest bank can be broke or insolvent.
They have not told the truth here. Somebody needs to get the truth. Maybe the fired or resigned manager will reveal what really happened here. Sad part is Citi probably moved him somewhere where he can’t be found.
I have called Charlie Gaspirino and Meredith Whitney about this. Also have spoken with David Enrich and several lawyers suing them about Falcon. Everyone seems leery of going after them. The truth is, they are crooks.
Thanks for your report, it comes closest to the truth.